I just realized something when analyzing the market in recent weeks: most F0 traders still trust the rule that RSI 70 is a sell, RSI 30 is a buy, as if it were some magical RSI formula. But in reality, the 2026 market is completely different. Today, I want to share how I actually use RSI to catch tops and bottoms without guessing.

First, let's understand its mathematical nature. The RSI calculation formula isn't as complicated as many think. It only measures the ratio between the average gain and average loss over the last 14 periods (or your chosen cycle). RS = Average Gain / Average Loss, then RSI = 100 - (100 / (1 + RS)). That's it. But the problem is: most people only look at the final number without understanding how it's calculated. When you understand how RSI truly works, you'll realize why RSI can get stuck above 80 in a strong uptrend while prices keep rising.

What's the biggest trap? When RSI hits 30, all the retail traders start buying the dip simultaneously, placing stop-loss just below the support bottom. Market makers know this. They will break through the bottom temporarily to sweep out your stop-loss (Liquidity Sweep), then truly reverse. I've been caught in this trap many times before understanding the mechanism.

Instead of trusting the 30/70 levels, I shifted to looking for Divergence—that's the real weapon. Regular Divergence occurs when prices make a lower low but RSI makes a higher low. This indicates selling pressure has exhausted, even though prices are still being pushed down. That's when I look to buy.

But there's a less-known type of divergence—Hidden Divergence. In an uptrend, when prices make a higher low but RSI makes a lower low, it's a great buy signal. Buying power is still absorbing supply well; it's just a temporary momentum slowdown. I've caught big upward moves by correctly identifying this type of divergence.

Don't analyze RSI on just one timeframe. I always follow the "top-down" principle: determine the main trend on Daily or Weekly, then find entry points on H4 or H1. For example, if D1 RSI is trending up at around 60, I only look for buy opportunities when H1 RSI corrects to 30 or shows hidden divergence. Trading against the main trend is the fastest way to blow your account.

The best way to confirm signals is to combine RSI with MACD. When RSI shows divergence at a bottom, don't rush. Wait until MACD Histogram shifts from red to green and MACD line crosses above the Signal line. When these two conditions align, the success rate can reach 80%.

Looking back at the Vietnamese stock market in early 2026, the Banking sector clearly demonstrated this. When RSI of bank stocks hit 82-85 on D1, many sold out out of fear of "overbought." But in reality, prices just moved sideways within a narrow range, RSI cooled down to around 65, then surged another 15% in just two weeks. Why? Because RSI calculation depends on how you compute the Average Gain. When strong up days fall outside the 14-day cycle, RSI drops not because of strong selling, but because of a "momentum reset." Understanding this helps you hold your positions tightly.

Here's a small tip: if the market is sideways, RSI will oscillate between 40-60 without a clear trend. At that point, I check the ADX. If ADX is below 25, indicating no trend, I turn off RSI and use support/resistance tools instead.

Finally, the RSI formula applies to all asset classes—stocks, forex, cryptocurrencies. But because crypto has larger volatility, reversal zones often occur at RSI > 85 or < 15, rather than the traditional 70/30 levels.

The key point: don’t treat RSI as an absolute alarm bell. It’s just one tool in your skill set. Combine it with candlestick analysis, volume, and other indicators. When you truly understand its mathematical nature, you'll avoid liquidity traps and catch real profit waves.